GANDHINAGAR, INDIA — As much or more than any plastics company in the United States, Milacron LLC is making a big bet on India.
The Cincinnati-based company announced in 2014 it was investing $30 million to expand its factories here, including doubling capacity at its Ahmedabad facility for making injection molding and blow molding machines.
One thing that stands out about Milacron's India presence, and which is unusual compared with other global plastics equipment makers, is that its India factories have attracted more investment than its Chinese operations.
Both countries have more than 1.2 billion people, but the rapid industrialization in China in the last 30 years has meant that its injection machine market of 30,000-plus machines a year towers over India and its market of roughly 5,000 machines a year.
So for most of the global injection press industry, China has naturally attracted the lion's share of investment.
Not so with Milacron, which entered India in a joint venture in 1995 and believes that the country is just now looking at a period of sustained growth.
Milacron executives admit they were late coming to China, but they hope to make up for it by being well positioned in India. They say India will be the second-largest polymer processing market worldwide by 2020.
“The growth that we had in the injection molding machinery business last year, it was over 24 percent year-over-year growth [in India],” said COO Ron Krisanda, in an interview at the Plastindia trade fair, in Gandhinagar, in early February.
As well, Milacron is seeing similar growth at the company's hot runner factory in Coimbatore, India, which it acquired when it bought Canadian manufacturer Mold-Masters Ltd. in 2013. About $10 million of its $30 million investment over three years will go toward expansion in Coimbatore.
“For the Mold-Masters hot runner business, I ran that up until July 1 this year, our India growth year-over-year was over 40 percent,” Krisanda said.
Hot runners are an example of the kind of potential Krisanda sees in the country. They're a very small part of India's market, used in only 10 to 15 percent of orders for molds, compared with about 60 percent of molds in China, he said.
“The conversion from cold runner to hot runner, that will drive a lot of Mold-Masters growth,” he said. “For us we see that as a great opportunity. If that gets to the same percentage of what the China hot runner business is today, it gives us years of growth opportunity ahead.”
He admits that “we came late to the Chinese market,” and while it's currently spending several million to expand there, its Indian operations are still larger.
Milacron's biggest base in India
Milacron's injection press factory in Ahmedabad makes more machines than any of its other factories globally, although it's not the biggest by sales, because India focuses on smaller and less expensive machines.
This year will mark the 10,000th injection molding machine Milacron has manufactured in India, Krisanda said. The U.S. company claims it has the No. 1 position in India's injection press market, by sales.
As well, Ahmedabad and its 800 employees are increasingly playing a larger role in Milacron's global plans, including in the design of its equipment, Krisanda said.
The company has injection machine design centers in the U.S., Germany and India, and they are led by an executive in India, which helps to give the company 24-hour design capability, he said.
“The leader of the injection molding design team is an Indian gentleman headquartered out of Ahmedabad,” Krisanda said. “He has a global role and he runs global operations from here.”
It's part of what Krisanda described as a concerted effort to better link Milacron's worldwide operations with common hardware and software platforms. In early March, the company announced a new “One Milacron” branding initiative.
“Milacron used to be very regionally focused,” he said. “Over the last two years we've really looked at how to globalize the company. That's become a key strategic element for us.”
Those global links are designed to speed the pace of product development, said Michael Prachar, vice president of marketing for the company's global plastics machinery unit.
“With the global presence, we act far better as one in the rate of innovation and the rate of new products that you will see,” he said.
In early April, Milacron filed for an initial public offering in the United States, and specifically noted it was making large investments in lower-cost manufacturing locations in India and China to help it improve margins.
“We believe our recent and continuing investments in low-cost manufacturing capabilities and our shared service center as well as the continued integration of prior acquisitions position us to drive significant margin improvement over the next three years,” the company said in the filing.
In the filing, it said that only 7 percent of its global $1.2 billion in sales are in India, with 9 percent of global sales in China, but it's not clear how exports from India would be counted.
It said 52 percent of sales came from North America, and 11 percent came from outside North America, Europe or China. That 11 percent presumably would include Milacron's sales in Africa, which is a big market for the Indian operations.
It said in the IPO filing that it had invested $12.6 million in its Chinese operations in recent years, compared with $16 million at its Ahmedabad factory.
Packaging drives growth in India
One of the drivers for the company in India is the movement of global packaging companies there, Krisanda said.
“You've seen a lot of international molders or packaging companies that are bringing product in here and that's driving different technologies,” Krisanda said.
Shirish Divgi, managing director of its Ferromatik Milacron India Pvt. Ltd. unit, said the Indian operation serves three markets: domestic Indian sales; direct exports from Ahmedabad, mostly to the Middle East and Africa; and finally exports to the United States, which are then sent to customers in North and South America.
In the domestic market, the company wants to bring better technology to local companies, he said.
At Plastindia, it introduced a blow molding machine targeting milk bottle production in India, and it unveiled, in a global launch, a new PET preform manufacturing system for bottle packaging.
“That's where the growth of Milacron came from, we introduce technology machines,” Divgi said. “We didn't have these technology machines in India until very recently.”
He said India's plastics industry concentrated on low-end markets from the 1960s to the 2000s, but since then more sophisticated applications in markets like packaging and automotive have grown.
“In the last few years I see many multinationals coming here, not only for the opportunities in the market but also for export,” he said.
Krisanda said the company's been able export successfully from India.
“We've been able to leverage the expertise here from a design standpoint, from a supply chain, from a manufacturing standpoint, for excellence, to really take the machine and export,” he said.